First Rental property at 20 years old

[Jacob Camilliere]

Hello all,

I am senior at University of South Carolina and am tired of paying rent!!!!

So heres the deal: For the past year I have been up my parents *** trying to convince them to buy a house in Columbia, Sc and pay me to be the property manager or let me live in it for free. One of my extended family members overheard me trying to convince my parents and they told me that if I developed a business plan and got the numbers together, they would consider helping me out.

So this is where im at now, I have successfully convinced my family member to co-sign a mortgage with me and contribute a portion of the down payment in a form of a loan to me. The house is $140,000 we plan on putting 10-15% down. I will contribute around $4,000 and he will contribute around $14,000.

He wants the terms of the loan to be $500 a month for 36 months to be compensated for the risk of him co signing the mortgage and loaning me the down payment. Once the loan is paid off, he will receive 20% of monthly profit and 20% equity in the house.  are these fair loan terms??

Just a little about the property: it is in a gated student community of single family homes. Was built in 2008 and has 100% occupancy since it was built. Rents for $1800 a month and increases every year. HOA is $230, and they have onsite property managers at 7.5% of (Gross rent-Hoa). I Estimated for taxes and insurance to be roughly $200 a month total. My predicted monthly cash flows are around $550.

let me know if those terms are fair or if I should counter him with something else

[Andrew R. Lucas]

@Jacob Camilliere Welcome to the club!  

My first property was 3 months after graduation from USC.  Me and my roommate decided we were tired of renting too.  We went together and found a great house on Texas St.  Then we talked to a mortgage lender.  Here's where I think you could learn from my mistakes...

I had already agreed to partner with my roommate.  Then I found out that Richland County and the City of Columbia both give first time home buyers "Free" money.  With that, I was approved for the house without the help of my roommate.  I received $5k at closing from the 2.  That more than covered my 3% down payment and gave me $300 at closing!!  Essentially, I did not need the partner.  I could have purchased this property without giving up any equity or cash flow.  

My advice is to get with a lender before you make any partnership decisions.  Find out exactly what you can qualify for, and how much if any money up front you need.  If you need a co-signer and no down payment help, then maybe you could just give equity and preserve your cash flow. 

Good Luck and Go Gamecocks!!